The total permanent disability insurance is an insurance cover designed to ensure that in case you suffer an illness or a disability that will cause you to be unable to work, you will have a soft landing. There are two ways in which you can take out a TPD insurance policy - either as an individual or through your superannuation fund.
Costs Covered By TPD
TPD insurance covers various expenses that you will incur once you have been rendered unable to continue working. Some of the costs covered include rehabilitations costs, medical bills, home modifications due to your condition, costs of hiring a nurse or housekeeper, mortgage or rent costs, education, day to day bills and debts.
TPD Through The Super Fund
If you want to take out TPD insurance, your super fund may be an option that you may want to consider. In the superannuation method, you continuously contribute to the fund as a member and your insurance policy is owned by a trustee of the fund. From your contributions, the trustee will be able to pay your premiums which are tax deductible. You can also decide to take out TPD insurance through the self-managed super fund, but to get cover from the self-managed method, the fund must also provide you with a death cover.
TPD Super Fund Tax
If your TPD insurance is in the super fund, the calculation of tax will be dependent on several factors. First and foremost, your policy must meet the definition of a super benefit for a disability. Another factor that will be considered is whether it is an own occupation or any occupation policy. "Own occupation" means that you will never be able carry out the duties of your current job, while "any occupation" means you will be unable to carry out any work that you are qualified to perform.
Benefits Of TPD Insurance Super Fund
Given the different options available to take out TPD insurance, a super fund has a number of benefits. A certain part of your benefits will be tax free when you use the super fund method, and your premiums are paid from your before-tax money, thus ensuring your premiums are always paid on time. You will also be eligible to get co-contributions from the government, and you can decide to have a smaller take home income, so you can gain from a lower income tax bracket. The rest of the money can then be sent by your employer to the fund, and your insurance premiums will be paid from the same amount.
Claiming Your TPD
Claiming your TPD insurance benefits can be a daunting task. Nevertheless, you can have a much more pleasant experience if you have the correct information. You need to be clear on the type of TPD insurance you have - whether you have the own occupation or the any occupation cover. Proof of your inability to carry out your main occupation for six months prior to turning 65 years is also required. In case you experience a partial and not a total disability, you can go ahead and claim a payment as long as you have satisfied the conditions for partial disability.
Kerrie Peacock is a personal insurance researcher who is expert to providing accurate information on insurance matters in Australia. Visit us for more information on personal insurance cover.